June 2013
By Elena Groznaya

Image: © Takayuki Ishihara/ 123rf.com

Elena Groznaya is a specialist in intercultural management and cross-cultural communication with global living and work experience. During the last three years she worked as a researcher, educator, coach and corporate trainer in Kobe (Japan), primarily specializing on the analysis of Japanese business culture and organizational cultures of multinational firms in Japan.


elena.groznaya[at]gmail.com


 

The issue of cultural balance in foreign firms in Japan

No modern-day culture is quite as distinctive as the Japanese, no market quite as peculiar to Western companies. Establishing a presence in Japan is not simply a matter of “…do as the Japanese do”, but rather a tricky balancing act between an established corporate culture and a strong traditional value system.

A corporate culture that corresponds to the interests of employees is a crucial element of success and will inevitably impact on business. This idea, that received a lot of attention in the last decades of the 20th century, continues to occupy the minds of both managers and academic researchers today. It is challenging enough to create a positive and motivating organizational culture within the borders of one organization and one country. However, challenges multiply and develop in often unpredictable directions when a multinational corporation has to construct an effective corporate culture that matches the values and expectations of employees in its foreign subsidiaries.

National versus corporate culture

N. Adler, an expert in the field of intercultural management, argues that national culture in a multinational firm outweighs organizational culture. The experiences of foreign multinational corporations (MNCs) in Japan provide us with great examples of a sensitive balance of corporate and national cultures within an organization.

The Japanese market reality

It is a priori not an easy task to enter and succeed in the distinctive Japanese market reality. Studies emphasize that a foreign firm aiming to enter the Japanese market will typically have to work its way through a number of structural obstacles, such as the influence of all-embracing, virtually impenetrable corporate groups (keiretsu); complex distribution; high business costs; particular customers’ expectations; and last but not least the peculiarities of the Japanese labor market and the lack of personnel with the required qualifications.

One of the major difficulties that organizations new to the Japanese market – especially those of small and medium size – have to face, is the task of attracting and securing highly qualified personnel. The limited ability of foreign firms to provide life-long employment, being alien to the Japanese organizational culture and – as recent research shows – an inability to generate employees’ loyalty, have negatively affected the image of international corporations. The Japanese are accustomed to the traditional idea of a safe and comforting long-life employment, providing family-like work relations and a tenure-based reward system.

Such negative perceptions, however, are becoming outdated. Recent studies show that MNCs offer practically as much employment stability as most of the Japanese firms. Post-bubble economic changes and crisis-related lay-offs within Japanese companies caused inevitable adjustment of traditional employment practices and negatively affected the employment of both young graduates and mid-career specialists. Nevertheless, foreign companies are still perceived to be a more risky choice for potential employees: the vast majority of university graduates still prefers to be employed by a home-country company rather than a foreign firm.

Attracting and retaining qualified personnel

At the same time, both the organizational culture and the policies of MNCs seem to offer a number of advantages that would appear to meet the expectations of younger and particularly female participants of the Japanese labor market. These include promising gender-, age- and tenure-independent career opportunities. Most of the multinationals seek to create a diversity-friendly environment and a merit-based promotion system. Another important advantage is an access to international exposure and a chance to practice foreign language skills. A lack of opportunities in the local labor market for mid-career and female professionals is another critical aspect. Japanese corporations prefer to hire male university graduates with the purpose of eventually training them to become well-integrated, committed company members.

Nevertheless, keeping in mind the strongly limited choices regarding employees, foreign multinationals have to make a considerable effort to attract and retain qualified personnel: there is strong evidence that the personnel of foreign multinational firms show a lower degree of commitment in comparison to traditional Japanese organizations.

One of the major reasons for this is a certain degree of discrepancy between employees’ expectations and the existing corporate culture. The work culture of multinational firms is like an unbalanced scale, with the home-country business culture on one dish and the contradictory present-day Japanese culture on the other. In addition to the standard complex issues of creating an effective corporate culture, this situation is a perfect reflection of the puzzling process of transformation within the Japanese society, where elder and younger generations are often completely alien to each other.

Fair doesn’t mean equal

It is a well-known fact that in order to succeed globally, a company has to consider the cultural specifics of the host-country and implement a certain degree of localization to adapt its practices to those traditional in the new market. Most foreign MNCs operating in Japan had to build a new corporate culture for their subsidiaries and implement new business practices partly based on effective policies of other subsidiaries and headquarters.

Some practices well approved in other locales, might not be applicable in the Japanese market. A good example of this is a Western corporation’s attempt to introduce a highly-variable, performance-based reward system in order to balance labor costs with an employees’ actual performance and to increase motivation. Such an initiative conflicts with the traditional Japanese principle of seniority and is either very slow to be implemented or is simply renounced.

An American expatriate in Japan working for one of the Forbes World's Biggest Companies, explains: “There is no link between job titles and performance plus intelligence in Japan. In fact, most of their rewards are linked to the time with the company, gender, and behavior and has very little to do with capabilities and performance. Recently, my company has been trying to change the performance review process in Japan to align it with global standards, but it has been almost impossible. Somewhere along the line I realized that Japanese have a different meaning for the words “equal treatment” versus “fair treatment”. While pay for performance is intended for the “fair” treatment of employees’ contribution to the business, Japanese people feel it is “not fair” because it is not “equal to all”. I have a hard time explaining that … shall I say ‘Tanaka-san does not earn his 100% bonus simply by showing up to work and sitting at his desk for 14 hours per day, even though he may be perceived as dedicated and hard working. Maybe it is indeed Mizumoto-san, who worked only 7 hours per day, who deserves 150% bonus for his unique efficiency and excellent contributions to the business outcome?’”

“Japanization” through Japanese middle managers

The significant factor that inevitably affects the corporate culture of a foreign firm is the strong culture of predominantly male Japanese middle-managers that serve as mediators between top management and the rest of the organization. In addition, most foreign firms in Japan tend to employ Japanese human resources managers and consequently extensively adapt to the Japanese style of management. This new issue of perceived excessive “Japanization” on one side offers advantages of adjustment to the distinctive Japanese organizational culture and market. On the other side it appears to compromise performance and motivation of younger generations of employees.

In spite of the intended liberal and open culture, the reality in foreign firms seems to be quite different. The consequent conflict of expectations negatively influences the satisfaction and commitment of a significant part of the qualified Japanese staff. A considerable number of young, often female employees of foreign firms express their concerns about the existing “glass-ceiling” of the promotion system: Transparent, yet unbreakable for them it benefits only foreigners or Japanese males with the appropriate tenure and degree of loyalty. While running interviews with employees of foreign firms in Japan, I often heard the opinion that foreign companies become very Japanese in Japan.

Interviewees often shared their dissatisfaction: “I feel quite stressed, because I have to adjust to the strong influence of the Japanese culture in the company… I joined a foreign company because I would be able to use the English language, work in a foreign environment, have career development chances and more personal freedom and work-life balance. I thought it would be easier to work for a foreign boss. But I work with a Japanese team. In general, foreigners try to be more equal and liberal. But Japanese managers have a traditional mindset. Even if the company offers some policies not typical for Japan, Japanese people are reluctant to do something because of others. They worry about what the others or the boss will think. I am not sure if foreign managers are aware of that.”

A number of expatriate managers seems to be not fully aware of the influence that the Japanese traditional culture has in their company. The others can see these tendencies but consider them to be absolutely normal for Japan as they reflect traditional society norms.

One expatriate with three-year experience in Japan shared his view: “Most of the middle-level managers of our company are Japanese. Most of the employees of our company are Japanese. In spite of the fact that we have a considerable number of foreigners, the Japanese employees still outweigh them. They bring their own culture that is difficult to change. We provide trainings on our corporate culture. Nevertheless, my experience shows that as Japanese say ‘The nail that sticks out gets hammered down.’”

Another expatriate with direct work experience on Japanese production sites says: “On one hand you have this new generation of young Japanese employees who are eager to work in a global corporation, who want to get the benefit from a global style and thinking, but are scared to death to take charge or make a tough decision because this could upset their elders. Many high-level positions are filled by people who have no clue on how to set a corporate culture; they simply got to that level due to their seniority and “good behavior” for years with the same company.”

Balancing individualism and collectivism

Another contradictory element of the puzzle, that highlights the inner-organizational west-east conflicts and draws together conflicting generations, is the pervasive value of collectivism. Beginning in the 1970s, together with the industrialization, the Japanese society started shifting slowly towards more individualistic values. However, this does not necessarily mean that the individual performance-based practices will automatically work in this multi-layer society. Experience of MNCs shows that individual decision-making, merit-based rewards and strong individual responsibility are still seen as a dare to most of the Japanese employees. The deeply rooted collectivist culture that offers the comfort of group-support, group-decisions and subsequently group-responsibility still appears to be quite influential.

One Japanese employee of an MNC expresses his perception of his Western colleagues: “There is a lack of interpersonal relationships. After work people just go home, they do not help each other much. There is a strong division between private and work life. At the same time it would be good for us to discuss some of the work issues at dinner.”

Another one says: “People do not support each other. They are very individual, mind their own business, not others. Foreigners are very result-driven”.

Indeed, most of the multinational firms do try to abandon the “excessive collectivist” practices, such as regular group meetings, group discussions, team events, and well-known after work “nomikai” parties, as they are considered to be time-consuming, expensive and inefficient. At the same time, the lack of these very practices causes a high degree of dissatisfaction and insecurity among the Japanese employees who find comfort in the information-sharing and the relationship-building activities.

Finding the middle path

It is a challenge to succeed and find the sensitive balance in the complex two-pole organizational and national environment of Japan.

As a foreign manager puts it: “How do you change a culture of perception vs. reality? I think we are a 100 years away from Japanese (employees – remark of the author) accepting this (modern western – remark of the author) philosophy. Or at least another 30 years… to get the new generation of thinkers in hot seats. Even this will require a lot of coaching and expatriate presence in global companies operating in Japan.”

At the same time, it is comforting and encouraging to hear a young Japanese professional say: “My mind changed totally. If I have to change my job, I would prefer a foreign company.”

There are stories of success, and a number of international firms have found long-run solutions and achieved favorable outcomes. Such stories could be of great help for both foreign firms planning to enter the Japanese market and those who have already established businesses in Japan.

One of the crucial steps of those who succeeded in the challenging Japanese environment was to create or often improve the company image, showing commitment to the country and its values by means of emphasizing a strong will and intention to build long-lasting relations based on loyalty and respect rather than a short-term profit-oriented approach. Other efficacious policies have included building a corporate culture that matches the expectations of those employees who chose to work for a foreign organization. This includes importing the headquarter’s values and having an extensive group of expatriates on all levels of the organization, making efforts to improve work-life balance and introduce the merit-based promotion system, combined with the team-based reward system, group discussions and extensive trainings favored by many Japanese.

When in Japan, one has to adapt to some of the traditions that are crucial for success in this distinctive culture, including the values of immediate situation awareness, validation of experience, non-judgment, patience, endurance, flexibility and never-ending practice. As a Japanese proverb puts it: “The bamboo that bends is stronger than the oak that resists.”